Sun, Inktomi Invest In Web Hosting Firm

Web hosting company Digital Island Inc. on Wednesday unveiled an alliance with Sun Microsystems Inc. and Inktomi Corp. that sent its stock soaring and solidified its position as a leader in the fast-growing content delivery network market.

Under the agreement, the San Francisco-based firm will expand its existing network by deploying up to 5,000 Sun servers equipped with Inktomi's network caching and content delivery software.

Also, Sun, Mountain View, Calif., will make a minority equity investment in Digital Island, and Foster City, Calif.-based Inktomi will make an additional investment in the company, adding to the stake it already holds in Sandpiper Networks, whose merger with Digital Island was announced in October.

Digital Island also unveiled Wednesday a technology and research alliance with technology laboratory and consulting firm, SRI International.

"Both alliances will play a key part in fulfilling our part of transforming the Internet into a fast, reliable and rich infrastructure capable of supporting the demands of interactive E-business," said Ruann Ernst, Digital Island's president and chief executive, in a conference call.

"The alliance between Digital Island, Inktomi and Sun recognizes that the bottom line of E-business is not just eyeballs but transactions," said Ernst. "It's not just getting the information and content out to the user for online advertising or online access, but it's about the ROI (return on investment) based on the transaction completed."

Ed Zander, Sun Microsystem's president and chief operating officer, called the move "a content management play at the edge of the network." The goal of the alliance is to create "a network that's as easy to use, as dependable and as ubiquitous as the public phone network, with a dial tone-Web tone ready for electronic business," he said.

Inktomi Chief Executive Dave Peterschmidt said the alliance was part of his company's strategy to become the leading provider of software for the Internet. "The three companies here today are forging the future of E-business," he said. "The work that Inktomi, Digital Island and Sun are doing as a result of this alliance will ensure consistently high levels of Web site performance to users across the world."

The Yankee Group, Boston, has pegged the content delivery services market, a segment of the content management market, at $10 million this year. The research firm predicts that the market will grow to $500 million by 2002.

After the announcement, Digital Island shares shot up 65 percent, jumping 45.31 to 114.94